Forecast

Watervliet Arsenal not worried yet about impact of tariffs

Larry Rulison| on
March 8, 2018

Gustave (Gus) Perna, fifth from left, a United States Army four-star general who serves as Commander of the United States Army Materiel Command, watches as a gun barrel is transported after being taken out of a furnace in the rotary forge building as he visits the Watervliet Arsenal on Monday, Dec. 11, 2017 in Watervliet, N.Y. (Lori Van Buren / Times Union) less

Gustave (Gus) Perna, fifth from left, a United States Army four-star general who serves as Commander of the United States Army Materiel Command, watches as a gun barrel is transported after being taken out of a ... more

Gustave (Gus) Perna, fifth from left, a United States Army four-star general who serves as Commander of the United States Army Materiel Command, watches as a gun barrel is transported after being taken out of a furnace in the rotary forge building as he visits the Watervliet Arsenal on Monday, Dec. 11, 2017 in Watervliet, N.Y. (Lori Van Buren / Times Union) less

Gustave (Gus) Perna, fifth from left, a United States Army four-star general who serves as Commander of the United States Army Materiel Command, watches as a gun barrel is transported after being taken out of a ... more

President Donald Trump's decision to exempt Canada - at least temporarily - from the steep tariffs he imposed on steel and aluminum imports in a White House ceremony on Thursday will likely help ease any concerns at large manufacturers like the Watervliet Arsenal, which depends on both foreign and domestic steel for the cannon tubes that it makes for the U.S. Army.

The arsenal, which employs 560 civilian workers, relies on military contracts for nearly all of its revenue, and is undergoing a $41 million expansion as it looks to hire 200 additional workers.

Trump's plan to impose a 25 percent tariff on imported steel and a 10 percent tariff on imported aluminum on March 1 triggered a sell-off on Wall Street over concerns that the move would raise business costs and curtail the economic rebound.

It also caused uncertainty for employers who rely on steel for the products that they make.

Even before Trump announced Thursday that Canada and Mexico would be exempt from the tariffs as the U.S. continues negotiations with the two countries on the North American Free Trade Agreement, or NAFTA, officials at the arsenal said they didn't believe any steel tariffs would have an immediate impact on their bottom line.

"A majority of out specialized steel products come from U.S. and Canadian suppliers," Watervliet Arsenal spokesman John Snyder told the Times Union before Thursday's White House ceremony. "Because of the uniqueness of our products, there is a long lead time on materials used to produce the cannon barrel. This lead time often ranges between six to eight months. Given that, many of our orders for steel materiel are already in place."

It is unclear how much steel the arsenal has to procure each year. Steel costs are critical to the arsenal's business model, which relies on orders from the U.S. Army and other branches of the military and foreign armies for revenue.

Since October, the arsenal has won $90 million in new weapons contracts. One of the latest is a $13.5 million contract from the U.S. Army to upgrade howitzer systems.

Of course, one of Trump's reasons for putting the tariffs in place was under the guise of national security. Trump has said that by relying too much on imported steel, the U.S. was putting its national security at risk. Therefore it makes sense that the new tariffs not hurt the U.S. Army's only cannon factory.

"We want to build our ships, we want to build our planes, we want to build our military equipment with American steel and aluminum," Trump said during Thursday's White House ceremony.

Trump appears to have listened to criticisms from even those in his own party who said that the tariffs could hurt the U.S. economy and harm allies.

U.S. Rep. John Faso, a Republican House member from Kinderhook who represents parts of the Capital Region, said in a radio interview Thursday that blanket steel tariffs could hurt the state's economy since 600,000 jobs in New York rely on trade with Canada.

Canada exports nearly 90 percent of its steel to the United States, making Canada the No. 1 steel exporter to this country. Canada is also a major exporter of aluminum in the United States, accounting for 40 percent of the U.S. imports. A large portion of Canada's aluminum industry is based in Quebec across from the New York border.

"I hope they will come up with a policy that targets countries that are not our friends," Faso told radio host Fred Dicker on Talk 1300.